Easily solved with -d '\n' for the most part. It does have -d though. Oh, goodie. 300 miles more rope to hang ourselves with. I think you missed my point -- xargs would know the maximum size of args for the system already and split accordingly.

Code:

$ cat >argc.c <<EOF
> #include <stdio.h>
> int main(int argc, char *argv[])
> { printf("argc=%d\n", argc); return(0); }
> EOF
$ gcc argc.c
$ while true ; do echo -e "a\na\na\na\na\na\na\na" ; done | xargs ./a.out
argc=65533
argc=65533
argc=65533
argc=65533
argc=65533
^C
$

...so the -n999 is redundant.

Shoving the too many args into backticks and for doesn't make too many args not be too many args. You have to do while read FILENAME ; do stuff ; done